USD/CAD – Canadian Dollar Quiet in Thin Holiday Trade, CB Consumer Confidence Next

The Canadian dollar is almost unchanged in the Tuesday session, with USD/CAD trading at 1.3540. There are no Canadian events on the schedule, as markets are closed for Boxing Day. In the US, today’s highlight is CB Consumer Confidence, with the indicator expected to climb to 108.9 points. On Wednesday, the US releases Pending Home Sales, with the markets anticipating a strong gain of 0.6%.

Canadian GDP in October was a disappointment, with a decline of 0.3%. This missed the forecast of +0.1%, marking the first contraction in growth since May. The Canadian dollar responded with losses, as USD/CAD jumped above the 1.35 level. Although fourth quarter growth is still projected at around 1.5 percent, economic growth remains at risk, which means that the Bank of Canada will head into 2017 with a dovish stance. The bank cut rates twice in 2016 in response to a weak economy and low inflation and if things don’t improve, we could see another rate cut in the first half of 2017.

The US economy continues to expand at a brisk clip, as underscored by the most recent revision to third quarter GDP. The Final GDP reading of 3.5% beat the estimate of 3.2%. This figure marked an upward revision of the previous GDP estimate of 3.2%. The stellar reading can be attributed to stronger consumer spending and an increase in business investment, and marked the strongest growth rate since the third quarter of 2015.

US indicators looked sharp to end the week. New Home Sales jumped to 592 thousand, which translated into an increase of 5.2%. This easily beat the forecast of 575 thousand. There was more good news from UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. The indicator was sharply higher than the previous reading of 93.2 points. The survey found that consumers are optimistic that the economy will continue to improve under Donald Trump. The president-elect has said he will cut taxes while increasing fiscal spending in order to pay for massive infrastructure improvements. The survey also noted that consumers expect economic growth to create new jobs and raise incomes.

USD/CAD Fundamentals

Tuesday (December 27)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.0%. Actual 5.1%
• 10:00 US CB Consumer Confidence. Estimate 108.9
• 10:00 US Richmond Manufacturing Index. Estimate 5 points

Wednesday (December 28)

• 10:00 US Pending Home Sales. Estimate 0.6%

*All release times are EST

*Key events are in bold

USD/CAD for Tuesday, December 27, 2016

USD/CAD December 27 at 9:20 EST

Open: 1.3524 High: 1.3547 Low: 1.3516 Close: 1.3545

USD/CAD Technical

• USD/CAD posted small losses in the Asian session and has been flat in the European and North American sessions
• 1.3457 is providing support
• 1.3589 is the next resistance line

Further levels in both directions:

• Below: 1.3457, 1.3371, 1.3253 and 1.3120
• Above: 1.3589, 1.3759 and 1.3889
• Current range: 1.3457 to 1.3589

OANDA’s Open Positions Ratio

USD/CAD ratio is showing slight gains in short positions. Currently, short positions have a majority (55%), indicative of trader bias towards USD/CAD continuing to move upwards.

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